For many Minnesota residents and retirees, there may come a time when they decide to move to warmer climates or to states with low or no individual income tax. However, they also want a place to come back to throughout the year and decide to either keep an existing residential property or purchase a Minnesota property. After all, it’s very difficult to give up a home, cabin or condo you cherish – especially if you have family here or love the summer months.
In such cases, it is increasingly important to know the Minnesota statues and manage your residency status to avoid unexpected taxes. Minnesota statutes allow for a person to potentially be a non-resident for part of a tax year if the move is made at any time of the year, as long as domicile is established in the new location.
The taxpayer needs to be aware that the State of Minnesota has been taking issue with the change of residency, and there has been an upsurge in residency income tax return audits. This is even more of an issue for mid-year moves, which is more difficult for the taxpayer to prevail.
Current Minnesota Court Decisions and Increased Attention to Residency
Recent Minnesota Supreme Court decisions have focused on whether or not the person’s domicile has actually changed or is still considered to be in Minnesota, after an attempted move out of Minnesota. There is a Minnesota Rule which establishes a presumption of domicile that needs to be overcome based upon evidence that the domicile has been established elsewhere.
One’s legal domicile is where one claims to be their permanent home. It is based on both intent and actions. The cases that have gone against former Minnesota residents have been decided based on findings that the taxpayer’s actions did not match up with their stated intent.
183 Day Rule and Moving Mid-Year
Minnesota Rules note that if a taxpayer maintains an abode in Minnesota and is present in the State for more than 183 days in a given calendar year, they will still be considered to be a “tax resident” of Minnesota for the entire year. The rule can create a contradiction for those who do everything in their power to change their state of residency in a given tax year, yet still have permanent residential property, whether owned or rented, within the confines of Minnesota.
How to Plan Ahead to Avoid Tax Consequences from Your Move
Planning for a change of residency is an issue that needs to be discussed with proper professionals before the move. Specific actions to help prove your intent as well as keeping of travel logs need to be considered to help overcome the presumption of domicile to Minnesota. Contact your CPA or Barry Divine to discuss your specific situation. After all, traveling back and forth is great but it requires money. Make sure you plan ahead when you decide to change residency from Minnesota to avoid tax surprises.